Buying a home is probably one of the biggest purchases most people make. However, the cost of the home is not the only financial responsibility you’ll encounter. Your home buying budget needs to include the various other costs associated with a real estate transaction.

When you are buying a home, ask your Realtor to explain all of these additional costs so there will be no surprises. He or she will be able to help you understand all aspects of the real estate process including determining how much you can and what afford and what you will need to set aside for extras.

Some of these additional costs will be related to obtaining a mortgage and insurance for your home while others include things like legal fees and taxes. The various charges involved in buying a house can add up, and for the most part, they are all legally required payments in buying a property. To understand what extra fees you will need to pay, here is a list of some of the major closing costs courtesy of the Ontario Real Estate Association and your local Realtor.

Appraisal fee

Mortgage lenders usually loan a percentage of the home’s purchase price or the market appraisal of the property, whichever is lower. The appraisal is either done by someone on the lender’s staff or by an outside professional approved by the lender. The cost of the appraisal is most often the responsibility of the home buyer.

Application fee

Find out whether or not your lending institution charges to process your mortgage application. In many cases, if you are dealing with a bank that you have other accounts with, they will waive the application fee.

Home inspection fee

Many homebuyers choose to have a home inspection done prior to finalizing their offer to purchase. Some lenders require a professional home inspection as well.

Insurance

There are several types of insurance that may be required when buying your home. If you are arranging a “high-ratio” mortgage (less than 25% downpayment) you will need to purchase mortgage insurance. Mortgage lenders require you to carry fire and extended coverage insurance that exceeds the amount of the outstanding balance of the buildings. Other insurance you may want to consider include title insurance and life insurance.

Land survey fee

Lenders require a plot plan or survey of the property you intend to buy. On properties located in subdivisions in urban areas, lenders will often accept an existing survey, depending on when it was done. However, if there is no existing survey, be prepared to pay a substantial fee for a new survey.

Legal fees

You will need to pay your lawyer to arrange your mortgage as well as for “disbursements” such as title search, drawing up the title deed and preparing and registering the mortgage.

Land transfer tax

This tax is payable by anyone who purchases property in Ontario. A Realtor or lawyer can help you calculate how much tax you will pay on your purchase.

Other costs

You will likely have to make property tax adjustments and interest adjustments on utility bills, heating oil etc. Finally, be sure to budget for heating, electricity, water and any immediate renovations you may have planned. It’s a good idea to put aside any spare cash and contribute regularly to a maintenance fund so you will be prepared for any repairs or upgrades you need to make along the way.

Buying a home is still a very affordable option for many people – even with these additional costs. Knowing what to expect will help you to be financially prepared so talk to a Realtor before you decide to buy. To learn more about the various stages of the home buying process, OREA has a free publication called How to Buy Your Home – to obtain your copy call 1-800-563- HOME or ask your local Realtor.

This article is provided by the Orangeville & District Real Estate Board for the benefit of consumers in the real estate market.